Litigation: Be careful what you say

In its simplest terms, a legal hold (also known as a litigation hold, preservation order, suspension order, freeze notice, hold notice or hold order) is a process that an organization uses to preserve all forms of relevant information when litigation is reasonably anticipated, according to Shira A. Scheindlin and Daniel J. Capra, who wrote The Sedona Conference, Electronic Discovery and Digital Evidence. Legal holds can take many forms and may be initiated by individuals within and/or outside an organization. For example, a hold can be oral, written or electronic and may be implemented by company executives, in-house counsel, representatives from the human resources or information technology department or outside counsel.

No matter who or how a hold is implemented—issuing a proper hold is essential. The purpose of a legal hold is to inform all relevant personnel of their obligation to locate and preserve all information that may be pertinent to actual or threatened litigation. To accomplish this task, a legal hold must provide some type of description of the actual or anticipated proceeding, identify the scope and type of information to preserve, and specify the locations of the information to be preserved. The hold must also confirm that any applicable document destruction procedures or policies of an organization must be appropriately suspended. A legal hold communication should also explain the ramifications of failure to comply with its directives.

While many legal hold notices begin with a template or form, each must be crafted to address the unique and distinct factual allegations anticipated to be at issue. The amount of information provided in a legal hold notice will depend on several factors—including, the number of recipients of the legal hold, the complexity of the issues in the legal proceeding, the type and format of the information to preserved and the likelihood that the information communicated in a legal hold will be discoverable.

In many situations issuing a single legal hold notice will not suffice. Instead, supplemental legal hold notices must be issued to fully comply with all preservation obligations. Courts have repeatedly held that counsel must oversee compliance with a legal hold, monitoring a party’s efforts to retain and produce relevant documents. See Zubulake v. UBS Warburg, LLC. Supplemental legal hold notices also ensure continued compliance with the legal preservation obligations. These supplemental notices may identify and include developments in the underlying proceeding, often identify additional or different custodians, and add to the type and source of information that should be preserved.

Generally, legal hold communications are not discoverable. Courts addressing the discoverability of legal hold notices have found that in most instances they are protected from discovery by the attorney-client privilege and/or work product doctrine. These protections apply because legal holds are typically issued by an attorney or at the direction of an attorney. While the entire legal hold notice will not be discoverable, courts often allow discovery on the issuance date of the legal hold, the hold recipients and the actions taken by recipients to preserve and collect information relevant to the underlying claims and defenses.

A party is usually entitled to know the categories of information covered by the legal hold for purposes of preservation and collection and how recipients were instructed to accomplish this task. As one district court explained, to the extent a party seeks to foreclose any inquiry into the contents of legal hold notices at deposition or through other means, such a position is not tenable. Specifically, a party may not be entitled to probe into what custodians are doing with respect to collecting and preserving ESI, but it is appropriate to allow discovery into what the employees are supposed to be doing. See In re eBay Seller Antitrust Litig.

Despite the general prohibition on production of legal hold notices in discovery, there are circumstances when legal hold notices themselves will be discoverable. This exception applies upon a preliminary showing of spoliation, which is the destruction or significant alteration of evidence or the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation.

Only a handful of federal courts have addressed when an exception to the preclusion of discovery of legal hold notices will apply. In Major Tours v. Colorel, the district court acknowledged that legal hold notices are typically not discoverable but that a preliminary showing of spoliation may warrant an exception to this line of authority. There, evidence demonstrated defendants had waited nearly two years before attempting to comply with their preservation obligations and several witnesses did not know about the existence of a legal hold or its preservation obligations. The court found this evidence sufficiently demonstrated a preliminary showing of spoliation. No federal court appears to have defined the requisite showing for a preliminary elements of spoliation.

Other courts have reached different conclusions in determining what constitutes a sufficient showing of spoliation. For example, in Tracy v. NVR, Inc., the district court denied a request to compel production of litigation hold letters, questioning but not deciding whether a preliminary showing of spoliation required the same standard of proof as a motion for spoliation sanctions. The court side-stepped the issue finding no preliminary showing of spoliation had been made despite testimony showing ignorance of a legal hold and its requirements, because there was no evidence establishing that relevant documents had been improperly destroyed.

Overall, in preparing a legal hold notice counsel must be cognizant of the fact that it could be discoverable either in part or in its entirety. Therefore, counsel should carefully consider what information must be included in a legal hold notice to satisfy preservation obligations, but also be careful not to include information that may be privileged or constitute work product.

Striking the balance between protecting privileged information and appropriately informing legal hold recipients of their preservation obligations is a challenge. Our next piece will address the impact of cloud computing and social media outlets on a company’s duty to preserve.